Legislative Session to End; Debate Will Continue

By Kevin Brinegar, President, Indiana Chamber of Commerce

The 2003 session of the Indiana General Assembly is scheduled to end within the next few weeks – April 29 by law, but with legislators publicly declaring their intent of an April 24 conclusion.

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If either takes place, it will be the first time since the mid 1990s that a budget-writing year has ended without a special session. A reason for celebration? Not really.

Although final details are being hammered out on the budget as of this writing, the ultimate document will only be a stopgap measure to keep the state in business. There will likely be an ongoing operating deficit of at least $400 million, without a comprehensive, long-term plan in place to revitalize the state’s economy and reverse the troubling trend of recent years.

Biannual budget sessions are intended to set the state’s spending plan for the next two years. The 2003-2005 document that will go to Gov. Frank O’Bannon for his signature will be the subject of immediate and constant review. At some point in the not too distant future, legislators will have to come back to the Statehouse to take up the issues that are so important to the state’s economic future.

The budget will borrow from school transportation and pension stabilizations funds instead of dealing forthright with the state’s economic problems. Some positive economic development initiatives are possible, although on a smaller scale than originally envisioned or needed.

The result was predictable as early as January 14, when Gov. O’Bannon’s State of the State address featured a list of past accomplishments and barely a recognition of the state’s budget woes. With legislators hearing nothing from the CEO of the state about how to proactively move forward, it is no surprise that the subsequent course was a failure to address or resolve the state’s fundamental fiscal and economic weaknesses.

A mid-session analysis by outside fiscal experts reveals that if the state continues on the path of doing business as normal, a budget deficit will remain until at least 2009. That is six more years not having the funding available to improve schools, develop information economy businesses and jobs, and take care of the many other state needs.

In six years, it will be too late to solve Indiana’s problems. Our best and brightest students will leave the state like never before; companies will not grow or expand their businesses as quickly – if they remain at all; and, as the Indiana Chamber has warned since the mid-1990s, the state will fall in the latter category in a world of haves and have nots.

There are several positive budget aspects, at this time. They include:

· No new business taxes or a rollback of the tax restructuring gains made last year

· No delay in property tax reassessment, which continues to be a cloud of uncertainty hanging over the state until it is completed

· An emphasis on holding the line in Medicaid and corrections spending

The school funding formula is the primary area of disagreement between the House and Senate. Dispute is understandable when there is not enough money to go around to assist both fast-growing suburban schools and a number of urban schools that are seeing declining enrollments. Fix the economy, increase the state’s revenues and future budget battles will be able to offer win-win situations instead of “win a little, lose too much.”

In an ironic twist that we don’t care to see repeated, the primary reason for the mostly amicable legislative session is that there is no money to spend. Arguments over spending priorities and divvying up discretionary funds are few and far between when the pot is empty.

It is almost certainly too late for substantive action to take place during this legislative session. What needs to occur, however, sooner rather than later?

The governor needs to improve the lines of communication between the executive and legislative branches, particularly with members of his own Democratic party. A resolution to the ongoing reassessment saga is required to provide an accurate picture of how the state’s property tax (and subsequent revenues) picture will change.

The Indiana Chamber has said many times that is not too late to act. Those chances, however, are very close to running out.

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